1. Basic Condition
A taxpayer is liable to pay advance tax if:
-
- Estimated tax liability(after deducting TDS/TCS) for the financial year (FY) exceeds ₹10,000.
2. Key Scenarios Where Advance Tax Applies
✔ Salaried Individuals – If they have additional income (rent, interest, capital gains, freelance earnings, etc.) where total tax due > ₹10,000 after TDS.
✔ Self-Employed Professionals & Businesses – Since most income is not covered under TDS.
✔ Companies & Firms – Must pay advance tax as per instalments.
3. Cases Where Advance Tax is NOT Required
✔ Tax Liability ≤ ₹10,000 (after TDS/TCS).
✔ Senior Citizens (60+ years) with NO business income (exempt under Section 207(2)).
✔ Income covered entirely under TDS (e.g., salaried employees with no other income).
4. How to Calculate Liability?
- Estimate total incomefor the FY (salary, business, capital gains, etc.).
- Compute tax liability(including cess).
- Deduct TDS/TCSalready deducted.
- Check if balance tax > ₹10,000→ If yes, advance tax applies.
5. Example
- A (Salaried + Freelancer)
- Total Income: ₹12 lakh (₹9 lakh salary + ₹3 lakh freelance).
- TDS on Salary: ₹80,000.
- Tax Liability: ₹1,50,000 (after deductions).
- Tax Payable: ₹1,50,000 – ₹80,000 (TDS) = ₹70,000(which is > ₹10,000).
- Result: Must pay advance tax.
- B (Only Salary Income, TDS Covered)
- Total Income: ₹8 lakh (salary only).
- TDS Deducted: ₹60,000.
- Tax Liability: ₹60,000 (fully covered by TDS).
- Result: No advance tax required.
6. Consequences of Non-Payment
- Interest under Section 234B: 1% per month if <90% of tax paid by 31st March.
- Interest under Section 234C: 1% per month for delayed instalments.
Summary Table
| CONDITION | ADVANCE TAX APPLICABLE? |
| Tax after TDS > ₹10,000 | ✅ Yes |
| Tax after TDS ≤ ₹10,000 | ❌ No |
| Senior Citizen (60+) with no business income | ❌ Exempt |
| Income fully covered under TDS | ❌ No |
